Man accused of identity theft, fraud in car scheme arrested

This building in Kenosha is where Mao Peng operated his Longen Trading LLC. Longen closed its offices earlier this year following a raid by the Secret Service. Federal authorities suspect that Peng was running a scheme involving the use of straw buyers to purchase about 400 luxury cars that were exported to China. Credit: Cary Spivak

The Secret Service arrested a former Kenosha resident accused of running schemes to avoid paying sales taxes while buying and exporting more than 150 pricey luxury cars, according to court records unsealed Wednesday.

Mao Peng and his wife, Min Ai, both 25, were arrested by the Secret Service on March 10 in a Los Angeles Chinese restaurant and are being returned to Wisconsin to face federal charges of wire fraud.

They are charged with avoiding more than $515,000 in state and local taxes by using members of Wisconsin Indian tribes as straw buyers to purchase the vehicles.

The cars, many of which were bought in the names of Oneida Indians, cost more than $9.1 million, according to an affidavit by Jeffery Ferris, a special agent with the Secret Service.

The Milwaukee Journal Sentinel first reported about the investigation in December.

Authorities believe Peng was behind an elaborate scheme involving more than 100 straw buyers to purchase more than 400 luxury cars — including Porsches, BMWs and Land Rovers — worth about $30 million. Many of the cars were later exported to China, where they can be sold for about three times what the vehicles command in the U.S.

In addition, Peng is charged with identity theft for continuing to purchase cars in the names of straw buyers without their approval, the unsealed criminal complaint states. Peng and his co-conspirators purchased 71 cars using the names of straw buyers without their permission, Ferris wrote.

"Peng had a financial incentive to purchase luxury vehicles via identity theft...because he could thereby avoid having to pay a fee — which typically ranged from $300 to $10,000" to a straw buyer, the Ferris affidavit states.

One Native American straw buyer told authorities that six cars were purchased in his name without his permission in 2012, Ferris wrote, noting that at least one of the vehicles was bought while the tribal member was in jail.

"His family would visit him in jail and tell him that he received dealership paperwork and license plates," the agent wrote, quoting the unidentified Native American.

Tribal members who live on a reservation do not pay sales tax if a product is purchased on the reservation or if it is delivered to the reservation.

The Secret Service seized about 30 luxury cars during a 2014 raid of Peng's home and warehouse, both located in Kenosha.

Those vehicles are at the center of ongoing legal dispute in which Peng has asked the court to return the vehicles while the U.S. attorney's office argues the government should be allowed to sell the cars and keep the proceeds.

Both Peng and Ai returned to China around the same time as the raids. Both were born in China, though Peng is a U.S. citizen and lived in Wisconsin for several years. They owned the Kenosha home for several months.

"They came back (to the U.S.) to confront the case and put the matter behind them," said Patrick Egan, Peng's Philadelphia lawyer. Egan said he did not know whether they planned to turn themselves in had they not been arrested.

The couple are being held without bail and being returned to Wisconsin to face the charges.

The Secret Service has been investigating similar schemes to buy and export luxury cars throughout the nation. Attorneys for the people involved in the deals elsewhere have argued their clients are doing nothing illegal — an argument that was accepted by a federal judge in Ohio last year.

Luxury car manufacturers say they are losing millions of dollars to the exporters and that they use fraudulent methods to buy and sell the vehicles.

To combat the practice, luxury car dealers generally require buyers to to sign a form stating they will not export the car they are purchasing.

Peng began using straw buyers after BMW, Mercedes and Porche each banned their dealers from selling to him, Ferris wrote.

About Cary Spivak

Cary Spivak does investigative business projects and covers the casino industry. He has won numerous state and national awards.